Impact of climate change on London's economy - summary slides
mtn-iawards2007
1. Global MTN
Awards
2007
Systematic trading notes spread
multi-asset class strategies
‘Green’ MTNs engage environmental
& social responsibility investors
Gulf & African FX, Korean inflation
& Asian NDFs extend EM excitement
ETN explosion exemplifies
new global grab for retail structures
Privately-placed vanilla reclaims
spotlight in crunch-ravaged market
2. Reprint from the mtn-i Awards Review. Contact: mike@mtn-i.com or call +44 (0)207 437 1333. www.globalmtn-i.com
Global MTN
Awards
2007
L a n d m a r k De a l s o f t h e Y e a r
International Bank for Reconstruction
& Development/ABN AMRO Bank
EUR230,000,000
Eco-3Plus Floored Index-Linked Notes
L
ike almost all of 2007’s other ‘green’ MTNs, the 6-year note
packages a principal-protected play on a proprietary index
of liquid stocks likely to benefit from increased emphasis on
environmental issues. It references the ABN AMRO Eco Price
Return Index of 30 companies across eight differentially-weighted
sectors (water, waste management, geothermics/alternative fuels,
platinum/palladium mining, wind power, water-powered energy,
bio-ethanol and solar energy); each must also pass an independent
social responsibility audit.
Coupons are floored at 3% and carry an annual cap of 26.4%,
based on monthly index observations. Negative annual performances
are added to the subsequent year’s coupon calculation.
Meaningful & important
“This was the most meaningful transaction we did in 2007 and
a very important one for us,” comments Doris Herrera-Pol,
global head of capital markets at the World Bank. As well as the
attractions of its structure, the deal highlighted the Washington-
headquartered supranational’s development mandate and its
socially responsible use of proceeds, she notes.
The deal contrasted strikingly with the year’s other eco jumbo, the
European Investment Bank’s 5-year public deal on the FTSE4Good
Environmental Leaders Europe 40 index via Dresdner Kleinwort, Merrill
Lynch and UniCredit. EIB, which must meet a notably larger annual
funding requirement than its triple-A peer, aimed to raise EUR1bn
from the second issue under its European Public Offering of Securities
(EPOS) programme, which allows for simultaneous offers across all 27
EU jurisdictions; in the event, the deal closed at EUR600m.
“We recognise that local markets and investment cultures differ
from country to country, and prefer to tailor-make securities in
response to local preferences,” notes George Richardson, head of
capital markets at the World Bank.
ABN did not participate in the EIB deal, which preceded Eco-3Plus
by several months.
Smart marketing
Smart marketing was key to Eco-3Plus’s success. The note was
launched during last September’s ‘Environmental Awareness
Month’ in the Netherlands, where vulnerability to rising sea levels
contributes to already high awareness of environmental issues.
Moreover, the World Bank’s role in sustainable development and
combating poverty was emphasised heavily. A prominent Dutch executive
director of IBRD, Herman Wijffels, played an important role too.
Denominations were set at just EUR100 to maximise retail
appeal. In the event, the average ticket size ended up at around
EUR85,000. The note was also listed on Euronext Amsterdam.
In addition, it made the triple-A IBRD the first sovereign/
supranational/agency credit to access ABN’s network (now being
folded into Fortis after ABN’s takeover last year by an RBS-led
consortium). While the bank had used its own name on previous
3Plus retail issues (without the Eco Index underlying) and takes
pride in its own green credentials, it selected the carbon-neutral
supranational, which also ranks as the world’s largest financier of
environmental projects, as the most appropriate issuer.
However, despite a widespread market view to the contrary, it
offered no tax benefits for buyers.
Unexpected jumbo
“It could have been a EUR5m MTN, but it kept building despite
the challenging market backdrop,” comments Clinton Orr, head of
public-sector origination at ABN AMRO. He puts the deal’s success
down to “the right name at a time of growing focus on socially
responsible investing”.
The size “surpassed our expectations”, agrees Heike Reichelt, head
of investor relations at the World Bank. She attributes this to “a
very, very well designed product” that was customised to specific
Dutch demand.
Subsequently, the pair combined on a near-identical EUR13.5m
tranche. This was sold into the bank’s Swiss investor base last
December.
World Bank officials note demand from dealers for further eco deals
in new markets. A “moderately optimistic” Orr cautions, however,
that not all issuers can earmark proceeds for approved projects,
which could hold future volume back. n
The most meaningful
transaction we did in 2007
and a very important one
for us
Doris Herrera-Pol
World Bank
“
”
Eco Success Story
As the pick of last year’s attempts to harness the growing environmental investment theme, ABN AMRO’s
Eco-3Plus note for the World Bank is a Landmark Deal of 2007. Very strong sales via the Dutch bank’s
domestic branch network built an initial EUR5m underwriting into an unexpected EUR230m jumbo with
more than 2,500 private investors, reports Julian Lewis.